Essay: Analysis Of Competition & Strategies For Growth In Fast Food Industry, Sydney City.

Overview of McDonald's and Hungry Jack's

Question/task issued by the lecturer in Week 4. The complete written report should be submitted in Week 9, before class begins.

“What must I do?”

Write a research report using primary data and secondary data.

Collect primary data (data you observe) from site visits to the premises of two competing Australian businesses in the same industry.

Collect secondary data (data from published sources, like news articles, books, journals, reports etc.) about the businesses or industry you investigated.

The lecturer will announce details of the site visits in class (which companies and where).

Students may go on site visits at their own leisure. Bring along a writing pad, pen and a phone equipped with a camera to record your observations.

Write a report about the state of competition in this industry (Week 4’s topic) and how the companies price their product or use non-price strategies to get customers (Week 5’s topic), and how they grow their businesses. Recommend how they could grow and improve their pricing and non-price strategies.

How many parts will the report have?

(i)Part I: write a literature review (an overview) of the state of competition in the industry in recent times, and developments that have and might occur in it

(ii)Part II: write about how the companies are trying to grow their business. Recommend growth strategies.

(iii)Part III: discuss the pricing and non-pricing strategies used by the businesses (based on your observations). You may support these observations by citing published works that speak about similar used elsewhere (news articles, books, reports, journal papers). Recommend strategies.

Criticalanalysis means demonstrate you have analysed your observations in an intelligent and creative way to unearth and identify patterns, motives or some interesting insight.

Analysis is more than just describing what you saw.

It is not merely saying, “I saw this… I saw that”. It is about “I saw Company A do this…, but this was not done by Company B. I noticed that because Company A had less staff, they could not do that. Also, I observed that Company A priced certain products like this… but the other company prices them differently, like this..., possibly because...”.

When citing published works, students should use credible, reputable Internet articles and/or books, journals and government, industry or other reports to support and enrich their findings. Do not cite blogs written by people who are not authorities in the subject. Do not cite a Facebook page.

Citing/referencing/plagiarism

In the body of your report, cite properly (do you know how to cite and reference published work? You should have learnt about it during Orientation Week). If not, you might be at risk of committing plagiarism. And plagiarism has penalties. Go here to learn again about what plagiarism is, and what the college’s policy on it. Learn how to avoid plagiarism by properly citing and paraphrasing sources of information (journals, books, news articles) here.

If you have figures and tables, they must be about something you wrote in the text. Do not insert a figure or table in the report, but there is no written text referring to it.

Also, if you have a figure or table, you must mention it in the text. E.g., “It is clear that the prices of petrol differ according to whether the petrol station is located in a high-income suburb or not (see Figures 1 and 2)”. Figures 1 and 2 should then appear after the paragraph in which you mention them.

Do not use appendices.

In what style should the report be written?

The report must be written professionally but in a clear and simple way. Do not use big and complex words if you can avoid it. Pretend you a business consultant doing a market survey or analysis of a certain industry that a company (or your company) wants to enter.

The layout and structure of the report should be neat and the formatting must be consistent. For example, do not use one type of font in some parts, and another type of font elsewhere. Imagine you are selling your report to a client. How would you make it look like?

How to submit the report?

The assignment must be submitted electronically in Week 9 via Turnitin. Upload it onto Turnitin through Moodle. The lecturer will give you instructions on this later.

If you fail to submit it on time, you risk getting a fail grade of 0%. Are you late with your submission? See the college’s policy on late submission here. In general, 5% will be deducted if you are late by one day, 10% (two days), 15% (three days) and so on. If you are late by seven days, you fail with 0%.

The purpose of this report is to make an analysis of industrial competition for two businesses. In this case, the selected businesses are based in Sydney city and they include; McDonald and Hungry Jacks. Therefore, the report will focus on analyzing the operation of the two businesses in terms of their competition. In this case, McDonald’s is a fast food company that was founded way back in 1940. The business was started by Maurice McDonald and Richard as a "hamburger stand" but later it became a franchise. The company is considered among the largest restaurants across the world. On a daily basis, the company can serve at least sixty-nine customers in over one hundred countries in various outlets. Also, McDonald’s provides soft drinks, breakfast, chicken products, desserts, milkshakes, and many others. The company's revenue was obtained from royalties, rent and fees from different franchise. To note, the company is the 2nd largest private sector with many employees across the world estimated at nineteen million. In Sydney City, McDonald's has very many outlets for example, "McDonald's Martin Place NSW".

On the other hand, Hungry jack’s is a fast food company owned by Jeck Cowin. The company is a franchise of "Burger King Corporation". The company owns various Hungry jack's/Burger King restaurants across Australia. The company is obligated to license all the new operators in the country by opening its new stores. Across Australia, the company is located in 390 areas. Among all the Burger King franchise in the world, Hungry jack is the 2nd largest (Connelly , 2016).

The investigation about the two businesses was carried out by observation, interviewing and reviewing the various literature about the business. This report covers various sections aimed at explaining more about the business competition of the two companies. The second section of the report illustrates the companies’ overview regarding their market competition. In addition, the paper also examines the growth strategies of the two businesses. Also, the report also illustrates the analysis of non-pricing and pricing strategies used by the two companies to boost their sales by capturing their market shares. In summary, the paper concludes by reviewing and discussing the results that were obtained (Bergen,2014 .)

In Sydney City, the growth of fast food restaurants is at a higher speed. Within the range of 5 years, the restaurants in Sydney have been in the position to expand by at least 30%as compared to the 5%for the past years. The trend in the market competition for restaurants in Sydney city is believed to be as a result of younger consumers. As compared to the U.S market, McDonald,s is not as strong as compared to its market in Australia (Sydney City). This high competition in the market of fast food restaurants in Sydney City is considered to be as a result of company's finding ways of serving or gaining popularity in the market by struggling to show up their products. An increase in the competition for restaurants in Sydney is also considered to be because of the provision of healthy and fresh meal unlike in the past days. In Sydney City, the competitors for fast food are McDonald' KFC, Grill'd, Red Rooster, Outback and many others. In this case, the new entrant in the fast food restaurants is, Grill'd, Thirsty bird, Lord of the fries, Mr. Crackles and many others (Danielle, 2014).

State of Competition in Sydney City's Fast Food Industry

The new entrants in the fast food restaurants in Sydney City are facing various barriers that are hindering them from competing with the original restaurants. In addition, these barriers are hindering the business from expanding. The barriers faced by the new entrants include the following; first, location; most of the new entrants are not located in good places. To note, for any business to operate effectively, it should be located in a place where customers are readily available. Also, location determines the existence of restaurants. In addition, good locations are easily accessible and visible to pedestrians. Also, the good location they are always surrounded by complementary businesses to restaurants. Further, they also provide cheap and plenty of parking. Therefore, new restaurants find it difficult to get such a good place. Even if the new restaurants find such places, they also meet difficulties in paying for mortgage and rent costs. This becomes hard to be cleared in the initial period of the company (Chen & Miller, 2015).

Second, economies of scale; this means the average costs that a restaurant incurs. At the start of business operation, restaurants face higher costs causing a barrier to the new entrants. To note, new restaurants in Sydney City find it difficult to negotiate for power with different suppliers so that they can demand higher prices. Therefore, the average costs of new restaurants in Sydney City incur high costs meaning that they cannot be in the position to compete with other restaurants which came earlier in the market (Swire, 2009).

Third, regulatory obstacles; most of the new restaurants in Sydney City face a problem of meeting the strict requirements of the City such as health and other licenses. Therefore, these regulations hinder the progress of the new restaurants in the marketplace. In addition, regulations make it difficult for new restaurants in Sydney City to Compete in the market. Therefore, new entrants in the market are required to contact various associations to seek for recommended appropriate regional regulations so as to compete in the new market (Granlund, 2009).

Last, Entrenched Competitors; in Sydney City, there are various restaurants in different areas in that the new entrants always face direct competition with the nearby existing restaurants. To note, the nearby restaurants already had their loyal customers thereby making it difficult for the new entrants to gain market support. Therefore, it always difficult for new restaurants in Sydney City to win the customers of other restaurants. For example, McDonald's has been in the market for very many years so winning its customers is quite difficult. The new fast food restaurants are required to offer various options that are different from the longtime restaurants so that they can win the market (Raue& Wieland,, 2015).

Growth Strategies of McDonald's and Hungry Jack's

According to Raue & Wieland (2015), the leading fast food restaurant is McDonald's followed by KFC. These are the top leading quick restaurants for over five generations. To note, McDonald's market share is considered to be 13% better than KFC. In this case, the market share of fast food restaurants in Sydney City depends on the Generation of the business. Considering market Generations, McDonald's is the most popular with 67.3% followed by KFC at 56%. The third most popular restaurant is Hungry Jacks's considered at 36.9% (Friedman, 2014).

Unfolding competition

According to Friedman (2014) the market competition of fast food restaurants has been reported to be improving as compared to the last decades. In this case, McDonald's is considered to be taking over the market competition with other leading restaurants such as KFC, Subway, Hungry Jack's and many others. In addition, the reported sales of fast food restaurants in Sydney City is $60.4 million as compared to $35.8 million in 2017. To note, the restaurant sector in Sydney city is becoming highly competitive due to the emergence of new restaurants that wish to take over the longtime ones. Also, all the competitors in fast food restaurants in Sydney city are considered to have good financial resources, greater "economies of scale" and revenue that have enhanced their existence in the industry. This has also helped the competitors to survive different market problems such as price fluctuation.

McDonald's is not only focusing on its core competencies but also provides other services. The company was majorly focusing on french fries, and hamburgers but it changed to other products because of the change in the consumers need. As a way of changing the needs of consumers, the company added more food types to its menu for example smoothies, salads, fruits, and fish. Further, the company also focused on serving vegetarians by opening up various stores in different areas such as India. Also, the company has changed the hamburger buns by removing "high-fructose corn syrup" form the foodstuff. Between 2015 and 2016, the company introduced a new gourmet restaurant service based on various gourmet such as Grill'd and shake shack. Therefore, McDonald’s changed from its core competencies to providing other different categories of services (Friedman, 2014).

On the other hand, hungry jack's focusses on its core competencies by selling Burger trademarks only such as TendrGrill sandwiches and TendrCisp and Whopper. The company has never changed to providing other services or products but instead, different names of products are changed or given more generic names for example "Veggie Burgher", "Grilled Chicken Burger" or "Hamburger". Hungry jack's menu contains its major products. Despite its location in various areas, the company has never thought of changing its services or product unlike McDonald's.

Pricing and Non-Pricing Strategies of McDonald's and Hungry Jack's

Considering the level of competition and market within Sydney city, the business needs to expand so as to get a wider audience. Despite the many stores or branches that the two companies have, they also need to continue growing so as to serve the growing population of Sydney City. To note, business expansions create more competition within busineses thereby increasing the profits merges. Therefore, these companies should grow or expand. The businesses can expand by using horizontal growth. In this case, horizontal growth refers to the strategy used by a business or company to increase the production of its services or goods using the same supply chain. The company may do this by using merger or acquisition and internal market (Berry & Waldfogel, 2010).

However, the process may result in a monopolistic market in case one of the business or company takes over the market. Therefore, the companies should use this strategy so as to expand their operations by focusing on new markets either in different business sectors or geographical location (Tiffany, 2012). Therefore, the businesses should adopt this strategy so as to compete in the market areas which leads to high gains despite the uncertainties and risks involved. To note, the companies can achieve from horizontal growth by implementing or using their existing knowledge and strength instead of targeting other markets which require much concentration and strategy. For example, Hungry jack’s works well in Australia, but it has more chances of being successful in other markets just like McDonald's is. In this case, McDonald's has tried to use this strategy inorder to dominate the world market. Also, the business can utilize their existing assets so as to monetize various categories of values for their business. This can be done by using an efficient network of running the business. If the business takes up this model the horizontal growth model, they will be in the position to enjoy various benefits integration such s "Economies of scale" and "economies of scope". In addition, the company's' market reference will be strengthened if the strategy is used (Akin et al, 2008).

McDonald's has implemented various pricing strategies that are helping it to take over the pricing competition in Sydney. With its new pricing strategies, McDonald's has been in the position to take over the fast-food sector in Sydney City. In this case, the business is using the dollar pricing rate for Cheeseburger and drinks ($1). In addition, the business has lower prices for its services, for example, Bacon McDoubles at $2 and triple cheeseburgers at $3. Therefore,  the new offering the company has implemented will help in increasing its customers in Sydney City. On the other hand, Hungry Jack's pricing is done in a cost-effective way. Despite its competition with other business like McDonald, Hungry Jack's idea of pricing depends on the quality of its products and costs. The price of Burges for Hungry Jack's range from 1-3$. The business's price strategy helps it survive in the market competition of fast food restaurants in Sydney City by earning high revenues. Currently, Hungry Jack's provides two optional meals that is to say; kid's meal and value meal. To note, the business designed the meals in that they can be in the position to attract more customers and also provide more profits to the business (Alonso et al., 2010).

Barriers Faced by New Entrants in the Fast Food Market

The strategies used by McDonald' and Hungry Jack's are quite different depending on the business plan of a given company. In terms of pricing strategies, McDonald's charges low prices for its products compared to Hungry Jack's. For example, McDonalds' charges $1 for small fries while Hungry Jack's charges $2.50. Therefore, it means that McDonald positioned itself as the cheaper fast food restaurant in Sydney City. The goal of McDonald’sto use this form of strategy is to increase its customers in the competitive market by charging low prices unlike its competitors. Further, McDonald's aims at maintaining its longtime customers thereby providing various offers. Unlike Hungry Jack's McDonald's aim at selling more products at reduced prices so as to gain market support in various areas of Sydney City. On the other hand, Hungry Jack's aims at increasing its profits from the services it provides by charging higher prices as compared to its rivals (Bodey et al, 2017).

If I was a new entrant in the industry of fast food in Sydney City, I would use various pricing and non-pricing strategies to gain competence in the market environment. In this case, I would use the following strategies, first, reduction on the prices; in this case, I would do this so as to make my product more desirable in the market. This would help to incase the demand for the products hence leading to increased revenue (Simandan, 2017).

 In this case, Hungry Jack's should reduce their prices for the burger so as to compete with McDonald's. This can be done by reducing their prices lower than the competitors. However, price reduction should be done by comparing the company's cost so as to avoid the business from becoming bankrupt (Patton, 2015).

Second, predatory pricing; this involves setting prices below the business's average cost for a short time so as to cause the competitors to become bankrupt(Johnson, 2016).. This is also described as an illegal and aggressive pricing strategy. this helps the firm to take over the market as its competitors are driven out(Bomkamp, 2016).

Last, increase in development and research, this leads to the discovery of better, high quality and new functioning products. This will lead to the increased demand of the products thereby attracting more comsers. In addition, research will help the firm to know various ways that can be used to gain market support (Duprey, 2010).

Conclusion

In summary, it is noticed that McDonald's is taking over the market for fast food in Sydney City. Because of its favorable pricing strategies, McDonald's will continue leading fast food industry in Sydney City. In addition, it is understood that more new entrants in the market of fast food in Sydney are working harder to take over the market, for example, Grill'd. This is achieved by improving the quality of their meals. For example, Grill'd focus on providing healthy meals which are not the case with some of the longtime restaurants such as Hungry Jack's. Therefore, to improve, the market for fast food restaurants in Sydney City, much focus so as to be invested in the interest of customers and market strategies.

References

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